Exploitation theory

The exploitation theory is a theory which attempts to explain the origin of profits which accrue to capitalists as being the result of the curtailment of wages which should go to the laborer. The exploitation theory which is one of the pillars of Marxism, was also put forth by other economists in the 19th century, such as the German socialist Johann Karl Rodbertus. The theory is based on the labor theory of value, or in other words the view that all goods that have value are the product of human labor. The conclusion of the labor theory of value led proponents of the exploitation theory to put forth the view that laborers, being the sole creaters of value, are entitled to the whole value of the goods they produce.[1] However, according the the exploitation theory, because the capitalists have control of the means of production, as a result of the institution of private property, they are able to force the laborer into a wage contract which only pays them a fraction of what they produce, the remainder going to the capitalist as profit.[1]Ludwig von Mises writes:[2]

“

The last resort of the critics of the liberal ideal of society is to attempt to destroy it with the weapons it itself provides. They seek to prove that it serves and wants to serve only the interests of single classes; that the peace, for which it seeks, favours only a restricted circle and is harmful to all others. Even the social order, achieved in the constitutional modern state, is based on violence. The free contracts on which it pretends to rest are really, they say, only the conditions of a peace dictated by the victors to the vanquished, the terms being valid as long as the power from which they sprang continues, and no longer. All ownership is founded on violence and maintained by violence. The free workers of the liberal society are nothing but the unfree of feudal times. The entrepreneur exploits them as a feudal lord exploited his serfs, as a planter exploited his slaves. That such and similar objections can be made and believed will show how far the understanding of liberal theories has decayed.

”

Ironically, by enacting laws taxing and regulating the employer in such a way that he is forced to work for less than what he would have obtained through voluntary transactions, the activists and politicians who believe in exploitation theory enslave (and, by implication, exploit) employers.